Compete to Stay Relevant – Malaysia's FDI Moment Is Now

New Straits Times

a day ago

In the race to attract global investment, Malaysia is learning that standing still is the same as falling behind. Once hailed as a regional darling for foreign direct investment (FDI), Malaysia now finds itself jostling for attention in an increasingly crowded Asean arena, with Vietnam and Indonesia pulling ahead through sheer momentum, bold reforms, and aggressive marketing.
The stakes are rising, and the time for half-measures is over. If Malaysia wants to reclaim its status as a top-tier investment destination, it must rethink, recalibrate, and reassert itself with urgency — not defensively, but strategically. This is Malaysia's FDI moment, and it won't come twice.
Let's start with the good news: Malaysia is still in the game. In fact, 2024 was a record-setting year. Approved investments reached a staggering RM378.5 billion — roughly US$86 billion — with foreign investment making up nearly half of that.
The services sector led the charge, and Malaysia continues to attract interest in high-value industries like electronics, green energy, and logistics.
But in the post-Covid, post-globalisation, and post-geopolitical-naivety world we live in now, "good enough" isn't good enough. Because while Malaysia is scoring points, the other teams are playing a different game altogether.
Take Vietnam. It's no longer just the low-cost manufacturing hub people once compared to Bangladesh. Vietnam has now positioned itself as the go-to partner for US and European companies looking to diversify supply chains away from China.
In 2024 alone, Vietnam secured over US$36 billion in FDI, driven by semiconductors, electronics, and renewable energy — sectors that used to be Malaysia's bread and butter.
And then there's Indonesia, Asia's sleeping giant that is finally waking up. With Indonesia's Nusantara capital project, sweeping tax incentives, and a booming digital economy, Indonesia has turned into an FDI magnet almost overnight.
So what's Malaysia's counterpunch?
First, let's acknowledge what's working. Penang has emerged as a vital node in the global semiconductor ecosystem. Companies like Intel, Micron, and Infineon are doubling down on Malaysia, not just for assembly and testing, but increasingly for R&D and systems integration. This is no accident.
It's the result of years of infrastructure investments, a relatively skilled workforce, and a geopolitical moment that favors "friend-shoring" — the idea that it's smarter to produce high-tech components in politically reliable countries. Malaysia must lean into this advantage and go further.
This means rolling out tailor-made packages for advanced manufacturing, doubling down on data center capacity, and becoming the Southeast Asian hub for AI model training and digital twin simulations.
Second, Malaysia needs to scale up its special economic zones (SEZs) — not just in size, but in sophistication. The Johor–Singapore Special Economic Zone, announced in early 2025, could become a game-changer if executed properly.
Designed to attract high-tech investment with tax incentives, cross-border mobility, and integrated infrastructure, the JS-SEZ could be a living laboratory of cross- border innovation.
But one successful zone is not enough. Malaysia must replicate this model across other strategic corridors: think Kulim–Penang for advanced semiconductors, Sabah for green hydrogen and carbon credits, and the East Coast for logistics and renewables.
These zones must be backed not just by policy, but by political will.
Third, speed matters. Investors don't just compare tax rates and labor costs; they compare time. Vietnam is winning because it's faster to approve permits, resolve land issues, and get factories up and running.
Malaysia's permitting process —even with the Malaysia Investment Development Authority (Mida) as a central agency — still suffers from fragmentation and red tape.
Now is the time to go digital-first. Leverage AI and OCR technology to automate customs exemptions, fast-track high-impact investments, and provide real-time investor dashboards. A "Single Window for Investment" isn't a slogan — it must be a reality.
Fourth, the green economy is no longer optional — it's the price of entry. Malaysia's Green Technology Master Plan and National Energy Transition Roadmap are strong on paper, but execution needs teeth. With the Energy Exchange Malaysia (Enegem) facilitating green electricity exports to Singapore, and Sarawak exporting hydropower to Kalimantan, Malaysia can become a regional clean energy hub.
But to do that, it must create an ecosystem that rewards green investors: carbon pricing, tax incentives for circular economy models, and enforceable ESG regulations. Sustainability is no longer just about saving the planet — it's about staying relevant in investor portfolios.
Fifth, Malaysia must move from policy to delivery when it comes to innovation. Too often, we celebrate policy launches but underdeliver on implementation.
Malaysia has the brains — just look at the deep talent pool in universities and startups — but the ecosystem to commercialise these ideas remains weak. Incentivise co-location of MNCs and universities.
Fund translational research, not just academic publications. Let SMEs participate in national sandbox projects for AI, biotech, and materials science.
Finally, institutional quality matters. Investors care about stability, predictability, and governance. The best incentive is not a tax break — it's knowing that the rules won't change every six months.
Malaysia must resist policy U-turns, stay clear of protectionist knee-jerks, and communicate with clarity. Political risk has now become a factor even for countries that once enjoyed a reputation for calm. Staying above the noise is part of the value proposition.
The bottom line? Malaysia is still in the FDI race — but no longer by default. It must now compete for every dollar, every data center, every gigafactory.
The world has changed, and so must we. The question is not whether Malaysia can reclaim itstop-tier status — it's whether it wants to. Because in the new FDI battlefield, strategy is optional. But speed, credibility, and ambition? Non-negotiable.
And in this new world, those who hesitate will not be bypassed — they will be forgotten.
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